IBM Predicts Local Stores Will Beat Online In Sales

IBM, known for its pioneering research in almost all things technical, has predicted that eCommerce may well lose out to physical retail in the next five years.

In a recent series of predictions from IBM, known as the ’5 in 5′ – which takes an educated guess at the innovations that’ll change our lives in the next five years – IBM has cast it’s eye over to the retail sector. It hasn’t taken a conservative approach to the future either, making a prediction that would surprise many involved in the industry: online will eventually lose out to brick-and-mortar retail.

Obviously this isn’t what many would expect, after all, online stores have enjoyed success for a while now, and behemoths like Amazon dominate the space without the need for any physical stores. There are other companies, such as WalMart, BestBuy and Tesco who have a rather healthy grasp on both the online and offline world of retail. But for the most part, if you’re not doing well in the online relm, you’re probably beginning to flounder on the high-street too.

So, what’s led IBM to think that things will change so drastically in the next five years? Well, thanks to research its doing with various retailers around the use of ‘cognitive computing’, it believes that customers can finally have the immediacy of physical shopping, with the “intelligence” of online.

This means that your customers will be able to walk into your stores and instantly be recognisable to staff. These staff members will know past shopping habits and anything a customer could well be interested in buying, meaning that when they decide to look for some help, they’ll instantly be given the help they want most. Of course, customers don’t have to go looking for help as mobile apps and augmented reality apps will help make their browsing experience in your stores far more seamless.

It’s a little sketchy on how it plans to deal with fulfilling customer’s desires to take an item home that day, after all a local store may not have that item in stock – or may not stock it – meaning that online could well win out in the delivery stage of purchases.

Speaking to Venture Beat, Vice President of Innovation at IBM, Bernie Meyerson, elaborated on why IBM believes the future of retail is in physical stores.

It’s not just about customer fulfilment, it’s also about creating an infrastructure that allows customers to gain insight and experience products hands-on. It also helps reduce the issues that surround online delivery, such as the vast amount of transport needed to shift items across the country. He believes it’s a way to help reduce pollution.

Meyerson also believes that this future of retail would be far more secure and private than shopping online where data is stored for humans to look at alongside your personal information. Here, in IBM’s stores of the future, you could come in, be offered the right products for you by a computer, and leave with nobody the wiser as to what you’ve bought.

The most interesting thing of all is that this vision of the future isn’t the ‘Us Vs. Them’ of physical against online, both competing for sales. Instead, this is a totally omnichannel approach, one that combines it all into one experience in a store. As Meyerson says “you’re combining the best of both worlds.

“On one hand you have a very personal relationship, which some people do prefer. At the same time, the technology they have available to serve you is as good as anything that’s been available in online shops. It’s an interesting evolution, and it is coming.”

Meyerson concluded by saying, “As you probably may have heard, there are a number of online shops that have talked about setting up brick-and-mortar showrooms, for this precise reason.”

Do you agree with IBM and Meyerson’s predictions for a more seamless store that can fight back against online? Or are physical stores really a dying breed?

Take a look at the IBM storymap below, and share your thoughts with us on Twitter @Customerss, or in the comments below.

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While the premise of this article may be on to something (a fundamental trend shift in shopping back to brick & mortar), aspects of at least some of the rationale varied from shallow to contradictory.

Thoughts:

- Depending on the retail category, ‘some’ shoppers like having an in-store rep who knows them. To sustain this model means higher prices to cover the higher costs to a brick and mortar retailer to have that caliber of rep trained and retained (vs competition which have reduced their on-floor rep presence and/or have lower caliber reps … allowing those retailers to offer lower prices). This shopping approach challenges the IBM outlook – reminding us of the choice every shopper makes: service vs. cost.

- Related to prior point, B2C/O2O shopping paradigms vary by international markets (at least). In 2013 we worked with the Walmart of India (Big Bazaar) to devise and deploy a tablet-commerce model that is a win-win for shoppers, small local brick & mortar retailers (who became distribution partners of Big Bazaar) and of course Big Bazaar. Rather than disrupt shopping models of consumers and small retailers in local communities in India, Big Bazaar provided tens of thousands of tablets to interested small retailers who typically circulate in their local communities to take orders. Rather than disrupting the market (driving small retailers out of business and retraining consumers to travel and shop at big box stores) , the tablets served as both a gateway for clientele of local retailers to offer the breadth and depth of Big Bazaar’s inventory (via their known and trusted local retailer), plus added efficiency to aggregate ordering, pricing and distribution. This model has parallels to aspects of IBM’s outlook.

- No evidence in this article that IBM factored anticipated Virtual Reality shopping advances into their thinking for this outlook. In the difficult economy of the last 5+ years, consumers have become thrifty with physical shopping trips. While ‘try-on’ is deemed an ideal way to sample at least some products, that way of thinking will be challenged by not only advances in virtual reality shopping, but by changing demographics of younger generations whose lives are more tethered to the digital world.

- I question the point made about reducing pollution. On the front end of shopping (seeking), the difference in pollution created between shopping online vs. traveling to shop at brick and mortar retailers … times millions of shoppers … is a no-brainer. On the back-end (distribution/delivery), even for purchases in-store/in-stock, pollution created by a shopper’s travel to brick and mortar is virtually ‘a-wash’ with pollution created by shipping to home (with the shipping-to-store alternative of custom orders opening the door to incremental pollution inefficiencies due to extra trip required by shopper to pick-up shipped product). Leave the pollution savings argument out, it’s full of holes.

- Privacy concerns are a significant potential strength of IBM’s outlook. As George Peabody of Glenbrook Partners just blogged in PAYMENTVIEWS on 1/13/14 concerning the mushrooming Target in-store credit card system breech, “… we’re in a security crisis …”. Coupled with the Orwellian NSA spying scandal, people domestically and globally – from political and business leaders to anyone paying attention – are increasingly feeling spooked and violated in the digital age. The efficiency of the digital world (including digital commerce) is being trumped by security/privacy/surveillance concerns that are outpacing safeguards in the form of proactive, effective technological and legal protections (Note: many nations outlaw data mining of personal and/or online shopping information … but that is not enough.)

Coupled with a generation coming of age with a front row seat to the economic pain and/or ruin of overextended friends and family … the emerging reality is to watch for cash to rebound as a percentage of overall transacting, and some degree of a retreat from online transacting – an opportunity for brick and mortar.

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